Lenny's Podcast: Product | Career | Growth - Hard truths about building in the AI era | Keith Rabois (Khosla Ventures)

Starting point is 00:00:00 idea of a PM makes no sense in the future. The skill is more like being a CEO now, which is what are we building and why? There's a lot of anxiety in the job market. AI is going to radically reorient lots of people's careers, and maybe including mine. What I've noticed in some of the best organizations is the number one consumer of tokens is the CMO. They don't need to rely upon deputies and deputies to get actual work product. I want to hit on some contrary intakes that you have your advice. You don't actually want to be talking to customers.

Starting point is 00:00:30 I hate talking to customers. I refuse to allow colleagues about and talk to customers. You have this idea of criticizing in public versus in private. High performance machines don't have psychological safety. They're about winning. You're uniquely great at helping companies build world-class teams. If a founder shows the ability early in his or her career to assess talent ruthlessly and accurately, here or she can go very far with no other abilities whatsoever.

Starting point is 00:00:52 It feels like it's never been harder to attract the best talent. Really talented people. When things are going well, they're not. not happy. The morale actually does go down when people are skating. The single role for the CEO is offsetting that complacency. The better you're doing, the more the CEO should push. Today, my guest is Keith Rabeau. Keith's resume, both as an operator and investor, is absurd. He was an early investor in Stripe, Palantir, Airbnb, YouTube DoorDash, Ramp, and dozens of other companies. He's part of the famous PayPal Mafia, where he was executive vice president of business

Starting point is 00:01:29 development and policy. He's also been the chief operating officer at Square, VP of corporate development at LinkedIn. He's also co-founded two companies, and he's currently managing director at KOSLA Ventures. It's safe to say that Keith is in the 99.9th percentile at identifying talent, building teams, and operating world-class companies. Before we get into it, don't forget to check out Lenny's product pass.com for an incredible set of deals available exclusively to Lenny's newsletter subscribers. With that, I bring you Keith. for a boy. Keith, thank you so much for being here and welcome to the podcast. It's a pleasure to be with you. Okay, so when we were starting this recording, you told me you're doing this from an iPad,

Starting point is 00:02:12 which I've never had, and you shared a crazy fact that you haven't used a computer in like years. Talk about what's going on there. Yeah, so when I started working at Square, Jack Dorsey was running the company off an iPad, and so I immediately converted in September 2010 and have a look back. I haven't touched a computer since September 2010. And everything I do in my life is either done for my phone, my watch, or my iPad. What's so interesting about this as you were talking is just there's this trend of engineers starting to code from their phone, like at Boris Churney-on and Simon Wilson, these two engineers that are like 10x engineers, and they're just like coding from their phone talking to AI.

Starting point is 00:02:49 And I feel like you've been preparing for this for a long time. Yeah, trying to be ahead of the curve. Jats's very good at being out of the curve. If you just watch what Jax's doing and follow, pretty good shape and technology. And just understand the benefit Is it just avoid distractions? Yeah, partially distractions. Partially just the flexibility like taking an iPad with you anywhere.

Starting point is 00:03:10 It's just super easy. Some laptops have improved since then but like the screen flexibility angles, but like just the weight. Like I carry my iPad with me everywhere. So there's no reason. There's nothing you can't perform unless maybe if you're doing heavy duty engineering,

Starting point is 00:03:24 which obviously has not been my forte in life, although I may have to start. there's no reason to use a more powerful, heavier weight, less flexible machine. Wow. iPad maxing, Keith Rabe. See if you got my Apple, as long as it's an Apple product or works. So appropriate. This episode is brought to you by our season's presenting sponsor WorkOS.

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Starting point is 00:04:20 And that's because they are the best, whether you are a seat-stage startup trying to land your first enterprise customer or a unicorn-execkel. expanding globally. WorkOS is the fastest path to becoming enterprise-ready and unblocking growth. It's essentially stripe for enterprise features. Visit WorkOS.com to get started or just hit up their slack where they have actual engineers waiting to answer your questions. WorkOS allows you to build faster with delightful APIs, comprehensive docs, and a smooth developer experience. Go to workos.os.com to make your app enterprise ready today. As I was preparing for this, Chad, there's just like so many directions we could have gone with this. You are so smart, so many things. I want to focus on

Starting point is 00:05:01 something that I think you're uniquely great at, which is helping companies build world-class teams. And I want to start in particular with attracting the best talent. And what's really interesting these days from what I can tell is there's just a lot of people that are struggling to find a job. It's taking it longer to find a job. It's just there's all these layoffs. On the other hand, it feels like it's never been harder to attract the best. talent. There are so many amazing companies doing amazing things, so much money flying around, these $100 million offers and things. And so from the companies that you are closest to that you see are best at attracting the best talent, what have they figured out? What are they doing

Starting point is 00:05:41 differently? What are some creative things they do? Well, let's start with first principles. The most important lesson I learned when I was working at Square from my board was Vinod, because it was on my board. And he said, the team you build is the company you build. And that adage is the most important thing when you're creating a startup. People get distracted with the market, with customers, with a product, with technology. Ultimately, it's a team.

Starting point is 00:06:05 If you have the right people, everything else will be easy and you have the wrong people, everything else is going to be difficult. So I actually learned this, Vinod distilled it, but I actually learned this back on my PayPal days. So, you know, in the early 2000s,

Starting point is 00:06:18 why was PayPal so successful? Why were there such a general, you know, subsequent generations of successful and interesting companies for 25 years now, it's because Peter, Teal, and Max Lechon marshaled an incredible density of talent. So it allowed PayPal to succeed

Starting point is 00:06:35 where possibly we wouldn't have. And these people went on with interesting ideas, ambition, and talent to build epic companies, you know, in all kinds of verticals. So from day one, I've always been, day one of my technical career,

Starting point is 00:06:49 technology career, I've always been focused on how, the importance of, critical density talent, how do you identify, retain, and promote people without talent? Back in the PayPal days, when I first started my career technology, I actually, truthfully, was not very good at this. Fortunately, Peter and Max were. So Max basically hired all the technical talent in the organization. Peter pretty much hired everybody else. They used their network primarily, so it was very difficult to get a job at PayPal unless you had a first degree or second degree connection to the engineering team or to Peter through

Starting point is 00:07:23 Stanford, which is a different type of recruiting model. It works really well if you have a strong network. I wouldn't recommend it for everybody. But if you have a network that has, you know, unique talent, there's no substitute. Interviews are not a great substitute in regards of how strong you are at an interview. But when I started back three years, I was mediocre at, let's say, hiring people, probably 50-50, you know, some good people, some mediocre people. That doesn't allow you to scale a team with an unfair advantage. But what I learned to do is steal people from other people's organizations within PayPal very successfully. So I got feedback from David Sachs, who was the CEO at the time, that I wasn't going to get promoted again until I could demonstrate

Starting point is 00:08:06 leverage, like leadership leverage, which hit an equation for one plus one has to equal three or more. So for every incremental person you hire, you have to show that you produce disproportionate returns, nominary returns. And because I wasn't hiring that, well, I wasn't really succeeding at that leverage. So when I went around, took the feedback into account and said, hmm, okay, I really want to get promoted. What do I do? So I found people within the organization that I felt had talent that were not being

Starting point is 00:08:34 leveraged to the highest potential in ambition. And I recruited them to my team. And that was very successful. And then I did get promoted actually fairly quickly because the people actually went up to speed. They were able to run really fast. And we produced a lot of really important results for the company. The lesson, though, that I took away was, well, that's great because what it showed

Starting point is 00:08:54 to me is I actually could identify talent. I just couldn't identify strangers with talent. So people that were in the building that I have lunch with or dinner with or go for one around the PayPal campus with, I was accurate at diagnosing their abilities. I just couldn't do it in a 20-minute, 30-minute, 45-minute interview. So the first hand is just double down on people I know. That doesn't scale perfectly, but learned to be excellent at if I had context assessing people's ability, superpowers, and, you know, weaknesses. Then over the next X years, tried to identify a different technique for identifying assessing random people, because ultimately, if you're going to build an organization, ultimately if you're going to be a VC, you can't just invest in people you already know.

Starting point is 00:09:43 So that took some years and requires some training. Anyway, I think, You can teach some of this to a founder. But one advantage a founder house that's going to thrive is if a founder shows the ability early in his or her career to assess talent ruthlessly and accurately, here she can go very far with no other abilities whatsoever. Hiring is like a muscle. You need to exercise it. You need to try, learn what worked, what did it, what could you have known, what did you miss,

Starting point is 00:10:14 why? and, you know, riff on that and try to get better at it. There are tactics you can learn. I think the tactics work pretty well within the middle of a bell curve, distribution of moving yourself 10, 20 degrees within that bell curve. I don't think the tactics can really teach you how to identify, call it, like, top 10 basis points, top 50 basis points of tall it. There you have to deviate from the norm.

Starting point is 00:10:39 And I think that's actually true of most lessons in life. If you're going to be extraordinary in any skill, you can't follow a playbook. otherwise, by definition, lots of other people would be, you know, the top 10 basis points. But you can get a lot better by learning techniques. So, for example, let's share a couple. One thing I think you can learn to do is be excellent at references. It doesn't work for hiring people right out of college or something because the reference context is going to be a little awe.

Starting point is 00:11:06 But I think without getting better at interviewing and assessing, if you just learn to extract the right information from ruthless referencing, So, for example, Ruth's referencing to me means Tony at Dordas does 20 references on every single senior hire. 20. Wow. I bet you he's pretty good. I bet she's been pretty accurate, too. So I think you can learn that. That's like a skill that's teachable, that being absolutely, you know, incredibly dedicated to your craft you can just get better at.

Starting point is 00:11:40 Back in the day, there's an investor at Greylock, who's on my board at LinkedIn, David Z. very successful investor, notable for both LinkedIn and Facebook investments. He used to teach at Greylock, you couldn't stop referenceing a founder until you hit a negative reference. So you would know you had exhausted the reference when you finally hit a negative reference. And so I think there are tactics there in a muscle building, how do you get the right information from the right people, how do you frame the questions, et cetera, that will lead you in the right direction. Now, you have to be careful. Let's say, I'll give you an example where these can go wrong. I've been a long-time investor from the seed round of a company called Fair,

Starting point is 00:12:23 founded by two of my colleagues at Square. Max Rhodes and Jeff Colvison worked for me at Square, and then the two other co-founders also worked at Square. When people were reference-checking Max, often most VCs asked the wrong question, which was Max was Max a good employee? The answer to that is very mixed. And so some venture capitalists, including some very good ones, were nervous about investing in fare. If they frame the question slightly differently, which is, is Max capable of being a world-class entrepreneur? The answer was yes. So again, it's like a tactic. You have to understand like what exactly am I trying to extract. Same person, wrong question, wrong result. And many people passed on fair and they regret it. And these are actually quite talented

Starting point is 00:13:11 investors, they just didn't frame the question correctly when they were calling someone like Jack Dorsey for the reference. Any other questions you find really helpful in extracting the right information? When I interview candidates for senior people in leadership positions, I always ask them, you know, look at whatever company they're out and say, if you were CEO, what would you have done differently? And you get a feel for the strategic mindset of, you know, can they drive value creation? Because almost by definition, they've come from a company that's had some traction success. So can they edit? So for in your case, I would have asked you, you know, if you were CEO of Airbnb, what would you have done differently? And you'll learn a lot from

Starting point is 00:13:47 that question. On references specifically, I think a general arc that's pretty good is asking the person, what would lead to this person being most successful? And if something were not to work out, what would be the primary root cause that you can identify if something going wrong? I think generally probing on those two arcs leads to a lot of insight. And that first question is for the candidate or is that in the record? Yeah, for the candidate. That's not the candidate specifically. Got it.

Starting point is 00:14:16 Because it's not, I don't want them to criticize Airbnb. I don't think that's that productive. But you can tell how much of the current business model have they absorbed. How much do they understand tradeoffs? And then they, can they create an unfair advantage? You know, because they have insights into afterwards. And then I have a follow-up question, which is usually gold, which is, let's say, I ask you this question about Airbnb.

Starting point is 00:14:39 you give you this great answer. I'm like, well, why weren't you able to persuade Brian to do it? So you made this interesting point that there's like tactics that can help you get better at finding and identifying talent. A lot of this is just the feedback loop of doing it a bunch, it sounds like. I find the feedback loop is so like, it's hard to actually like, like most people interview higher and then don't really learn much from how it ends up going. Like there's this gut thing that happens, but they're not like really thinking about it. Do you have any advice for just how to make the most out of the lesson of seeing how. something went. So I've read some research on the topic and if you ask yourself 30 days after any hire, would you make the same decision? That 30 day loop is pretty pretty useful and it basically it's as accurate as measuring a year or two years out. So you've got a pretty tight feedback loop and you can ask the entire hiring team. So I think that is just a technique that every company should use.

Starting point is 00:15:32 I want to talk about this framework that you have barrels and ammunition because this is really mind expanding and helping people understand who to even hire? So look, most companies raise money. They have some traction. They read, you know, just C Brown. They get launched, get some traction. Then they raise a lot of money, whether it's a series A or if it would be. And then they hire a lot of people infallibly, or at least historically.

Starting point is 00:15:55 And then the CEO, almost without accession, gets frustrated because they've hired a lot of people. The burn rate has increased a lot. And they don't feel like that's more, get more getting accomplished per unit of time, per day, per week, per month, or quarter. And they get frustrated. And so then they sit around at a dinner with other CEOs or people like me or one-on-one conversation with me and are incredibly unhappy and disappointed that I'm spending all this money

Starting point is 00:16:17 and all those people, but we're getting less done or the same done. And why, why, why, why? After years of sitting through these conversations at dinner with other CEOs or CEOs, I realize that the fundamental driver of this is that the number of people that can independently drive an initiative from, beginning from inception to success is very limited within any company. And if you hire more people without expanding the number of what I call barrels that can drive from inception to success, all you're doing is stacking people behind the same initiatives.

Starting point is 00:16:55 And so you're wasting time, energy, and increasing your collaboration tax, your coordination tax. And so that's what causes the drag coefficient. So, for example, at PayPal, we had about 254 people in Maloney's. view when we were acquired. Of those people, depending on how strict you really want to be, it is considered one of the best talent-rich networks of all time in technology. There is between 12 to 17 barrels in the organization. That's like an infinite number. I once asked Jack Altman on a podcast at Ladis, which is pretty damn good company, how many barrels are the company? The answer was two. That's a more common answer for a very good company. So you have between

Starting point is 00:17:35 In two, let's say 15 barrels that accompany. That defines the unique number of things you can do in parallel versus sequentially. And just hiring more people is not going to change that. And if anything, it's just going to cause a collaboration or coordination taxing, you're going to have a traffic purpose and you're going to do less. So the key is to me is if you want to do more or need to do more, your market requires you to do more, your business model requires you to do more, VCs require to do more, you need to have more barrels.

Starting point is 00:18:00 Now, the question is how and when and, you know, there's a lot of details. there, but fundamentally, the ratio of barrels to ammunition is what dictates the number of important initiatives that can be pursued simultaneously. And you're not saying you don't want ammunition. Like, it's valuable to make an impact. You need ammunition in addition to the barrel. Yeah, you definitely need ammunition. And it depends on what kind of project.

Starting point is 00:18:23 There are types of projects where an individual barrel may be able to succeed with very limited or no ammunition. Sometimes, you may need a designer, an engineering team, a PM, a database. data analysis, blah, blah, well, depends on what the project is, what the problem you're trying to solve is, what's the proper amount of ammunition. But once you think about the ratios of ammunition to the problem, you can be much more constructive than deliberate and intentional about the team construction. Most people hearing this assume they are barrels.

Starting point is 00:18:56 What helps you understand if someone's truly a barrel? Can they take an idea and make it happen? Basically, we're going up that, there's a hill over there. that's the hill get us over that hill and one way or the other they will motivate people if they need to they will accumulate resources if they need to they will measure what they need to and they're going to get your company across that hill that's a barrel anything less than that is not a barrel and so this is skills like internal poll at org stuff resource like strat like what yeah it's kind of the collection of all the things to get the collection of all those things is basically there's an

Starting point is 00:19:37 outcome CEO wants CEO founder wants an outcome and come hell or high water this person is going to deliver that outcome then the outcome can be you know fairly narrow and not that difficult in the beginning and then you expand the scope you know the complexity the difficulty that you basically entrust to your barrels and and sometimes they have no line of sight of how to solve it when you start sometimes you have a preliminary idea. So it ranges, but ultimately it's that skill of, I'm going to take this off your plate. You can fire and forget, and this is going to happen.

Starting point is 00:20:13 And it's not going to happen. I'm going to come back to you proactively with the issues I'm confronting. What I've already tried, the diagnosis of the root causes and ask for your help with sufficient time for you to intervene and try to brainstorm with me to get us to the right answer.

Starting point is 00:20:29 Agency is the word that comes to mind when you talk about this role. Yeah, I think agency is accurate. The problem I have in terms like agency is it's a little bit like strategy because in one ear, a lot of people on out the other year and they don't really process the meaning. Yeah. Who are some examples of barrels that make this real to people can understand what you're talking about? You know, I talked to my YC lecture in 2014 about how to operate. They can be as simple as the now someone famous in technology smoothie test, which is, you know, we used to have engineers work.

Starting point is 00:21:01 pretty hard at Square and pretty late. And I always wanted them to have, like, food. So they wouldn't be fabulous. They wouldn't be distracted. And I didn't really want them to eat, like, junk food. Because I actually think junk food's bad for you, bad for your brain, et cetera. So settled on delivery and really wanted to provide, like, at 9 p.m.,

Starting point is 00:21:21 like cold smoothies. And we had a, at that time, a pretty substantial team at Square, office team, EA's, you know, this was not a lean, mean organization. And so I tried through the office team, EAs, and nothing, we never got healthy, delicious, and cold smoothies delivered at 9 p.m. Just kept that one. It's getting frustrated because if the smoothies aren't cold, then no one's going to eat them. They don't arrive at 9 and no one can really bake on, you know, the refreshment, the refreshments.

Starting point is 00:21:55 Everything went wrong. And then I had this intern named Taylor Francis. And I was explaining just my frustration. It was like a second day at work. And he's like, I'll solve it. And I was like, okay, kid, good luck with that. Like, I was like, sure, keep trying to try. Anyway, day goes by.

Starting point is 00:22:18 Now my plot arrives. And lobehold, smoothie show up at 9 p.m. Delivered on the standing desk table where the engineers would congregate. I sample them. They're cold. They taste great. And I'm like, oh my God, I found a barrel. And I later gave him almost everything to do.

Starting point is 00:22:37 I want to go back to actually the first question. You shared some amazing advice for how to identify great talent. But I'm still curious when you find that barrel, for example, when like everyone's throwing money at them. There's all these amazing teams to join. What are some things that companies do to attract and convince them to join their team? The standard of stuff is still true. Mission, selling the vision of mission.

Starting point is 00:23:00 is indispensable. Most people who have proven talent anyway, at least in the current world, are going to attract offers for multiple opportunities. And so you've got to convince them that your opportunity is very special. I think one way to do that

Starting point is 00:23:15 that's a little bit more nuanced is convince them that their particular skill overlaps with the critical blockers to the current company, meaning they're betting on themselves. So, for example, if they are superb at, let's say, marketing, if the biggest blocker of the company

Starting point is 00:23:35 in the company's current success is not technology, not the product, but we believe it's marketing, it's really easy to go to a world-class marketing person and say, not only is this great company building something really cool and interesting that you'll be proud of, but your particular ability

Starting point is 00:23:51 is very unique and differentiated, and you can solve this. This is actually how I wound up at Square. Back in 2010, I was actually, I'd just been aqua hired into Google and was planning on being a VC actually next after I was kind of like vesting whenever Google is going to compensate us.

Starting point is 00:24:11 And then the investors in Square called me up and they said, hey, we've been looking for almost a year now for someone who knows something about financial services yet is still entrepreneurial. And they're like, hey, there's only three of these at the time, 2000, there's like, there's only really two or three of you. in the world.

Starting point is 00:24:30 You know, so would you be interested? I said, well, maybe. But that was the argument to me that made me leave Google early, like after two weeks and infuriate everybody. And bypass, you know, venture for another three years, which had been my plan, was because they made the argument that, hey, I was one of three people in the world that could actually do this job. So there's like a, I don't know if it's ego, but it's also just like impact.

Starting point is 00:24:55 Yep. Well, exactly. Impact. You have, you have talent. Do you want to use them? and you want to feel that you're challenged every day and that what you're doing really, really matters. So I think that can be extremely helpful.

Starting point is 00:25:05 You know, my more important arc in this is, I think you have to build a company on undiscovered talent. Like, I don't think you really want to compete for the people that everybody else wants, right? And, you know, I learned this at PayPal. Peter taught me this literally the first day, at first week of my job at PayPal, that the way to build a company,

Starting point is 00:25:25 we were jogging around the Stanford campus is you've got to find these understores. discovered talent. That's the only way to scale organization against these large incumbents with infinite money, et cetera. And, you know, I've been on that crusade for 25 years. For those who are interested, you can link to it. I gave a speech at Ramp, you know, how to hire the talks in detail. I also recommend Eric, CEO of Ramp's speech, which is fairly similar of both videos are online. That's such interesting advice and it makes so much sense. You're not going to be able to

Starting point is 00:25:51 afford the people that have done the thing at top companies. And also they're just probably not the people to join early. Well, they're also not maybe the people you want. So there's adverse selection. But, you know, it's like a salary cap. Most sports these days have salary caps. And when you're a startup, not only do you have a salary cap, you probably have one-tenth the salary cap of the people you're competing with. So you've got to figure out how to leverage, you know, less assets to more success. Well, it's just one tip when you're looking at when you're looking for a discovery talent that's a sign of, okay, this person is really special. I know you have a lot to talk about here, but just like what's one tip?

Starting point is 00:26:27 I think it's basically isolating why other people aren't going to process them correctly. Like, most recruiting at large organizations becomes sort of a homogenous function. And so if you understand why this person is going to get thrown into this block box kind of thing and not get processed accurately, it's pretty easy. So I always think about, you know, let's say this person was interviewing at meta or Google or block these days or Coinbase, what are they going to miss? And then why?

Starting point is 00:26:59 And then that leads to, oh, perfect. So sometimes it's just lack of information. Like one of the reasons why, you know, sometimes it's controversial to say this, but one of the reasons why the net impact of my higher undiscovered talent is you wind up skewing younger.

Starting point is 00:27:15 It's not because you need young people. It's that younger people have, by definition, less data. It's like, you know, we use credit scoring, FICA scores. It's the same thing for employment. By the time you're over 30-some lot of things, there's so many data points about you that this black box machine is usually going to process you like many other people. If there's no data points, it's very hard for a black box machine that does homogenous evaluation to evaluate you. So there is alpha, so to speak, by definition for people who have like no data points. It's interesting how this is the same skill as being an

Starting point is 00:27:49 investor, picking startups to invest in. Yeah, absolutely. Okay, I want to talk about something else. I asked a few people that know you well that work with you at various companies, what's talked to you about. And one person said that when I asked him what to talk about, he said, my immediate reaction is that he is a bar raiser. No matter what kind of numbers we put up, he pushes us to do more. In fact, often it seems like the better we do, the harder he pushes.

Starting point is 00:28:14 Does that resonate? Yeah, I think that's true. I mean, I think, look, ultimately, I'll channel someone else's feedback, but it's in the same thing. So a friend of mine is a CEO once asked Mike Moore. It's like, what's the most common denominator of the best CEOs ever? And he said it's the relentless application of force, quote. I think that's the job of the CEO.

Starting point is 00:28:38 People eventually get comfortable, complacent. The more success you have, the more complacent the organization tends to get. In the single role for the CEO is offsetting that complacency. So put the point, the more successful, you have, the better you're doing, the more complacency naturally kicks in. And unless you've erected a network effect, you do not want to get complacent. And even then, to debate whether you should. But fundamentally, most businesses are not network or market businesses.

Starting point is 00:29:06 They are not going to run on their own for a long time. So I think that's one insight is the better you're doing, the more the CEO should push. Secondly, it's a little bit like sports when you're growing up. people when they're winning take advantage of feedback better than when they're losing usually. Like so, for example, you know, now what I do is mostly, mostly VC, mostly a board member, mostly I can see the area to founder. And when the company's struggling, maybe what's less intuitive, and you may pick up on this in your research and, you know, interviews of people who know me,

Starting point is 00:29:41 when a company is struggling, I'm actually usually a very non-critical in more like a coach and supporter. Because the company, the founder knows they're struggling. Being critical doesn't really help themselves of problems. That's when being supportive can actually somewhat counterintuitively more important. But when the company's thriving, it's really important to be critical and isolating things that will eventually be problems while everybody in the company is really happy and borderline complacent. So you kind of want to be the opposite as a default. And that's like a really good sports. coach. When you're winning is when to polish everything and really master the details.

Starting point is 00:30:24 When you're losing, you definitely also have to be exciting people and embracing the future and selling the future. So is the advice say someone's listening, a founder or product leader, the advice here is just keep pushing harder, set the bar higher as things, even if you're doing great. Yeah, if you're doing great. Well, also you have to remember, like, I remember giving a speech once it's where it's like you get to a certain threshold, crazy. it's influxion. Momentum gets you a certain, you know, valuation and all these like attributes. But it's kind of like winning a Super Bowl. You get, the last year was great. Last four quarters is wonderful. It's like winning the

Starting point is 00:31:02 Super Bowl. You got to come back next year and start your record zero, zero again. And you remember that. Actually, adventures like that. I'm only as good as my last investment. I've had like 13 years or whatever, pretty damn good investments. But like, truth, they have to wake up every day and find, some undiscovered founder that's going to change the world. And if I don't do that, it doesn't matter what I've done the last 13 years. And a company's kind of like that. The company can skate on autopilot for a while.

Starting point is 00:31:30 Venture, you really can't ever skate. I definitely saw this with Brian Chesky. It just felt like things were going great. And we just shipped amazing products and growth is up. And he's just always like pedal to the metal no matter what. Just like, come on. When are we going to take a little break? And it's interesting because when we did have the little breaks here and there,

Starting point is 00:31:48 more else actually went down because people are like, what am I working on? I don't know. It's not that exciting. Brian and I are usually in sync a lot. There's a really good interview where I interviewed him. Also at the same conference, I've had a hire when he talks mostly about founder mode,

Starting point is 00:32:01 but it generally is subscribed to virtually all of Brian's views. He even taught me some of these things himself. But the more important point, I think you identified, which is very subtle, is really talented people or like superb athletes. and when things are going well and people are really kind of coasting, they're not happy. They have an internal clock tempo. They just want to create things and create value and drive, drive. And like, you know, the morale actually does go down for the best people in the world when people are skating.

Starting point is 00:32:37 Okay. So actually along those lines, there's a lot of anxiety in the market, in the job market about the future of careers are, if I going to have a job, Am I going to like where things go in? And it just feels like people are working very, very hard. There's just putting a lot of hours, especially the most AI pelt people. It just feels like they're working harder than ever. I don't know if you saw this thing Tyler Cohen put out of just like work harder. Now is the time to work harder because AI is eating away at your value.

Starting point is 00:33:04 You know, you probably talk to a lot of people looking for career advice of just like this feels scary and I feel like I'm working too hard. What should I do? I don't know. Do you have any just like advice for folks? Well, I do you think AI. AI is going to radically reorient lots of people's careers, maybe including mine. So I think that's actually true.

Starting point is 00:33:23 And I think the way to thrive in a rapidly emerging technology world is to be intellectually occurrence. So, for example, you know, I'm a business person historically. You know, I did actually could when I was really young, but like basically, professionally, just a business person. What I've noticed in some of the best organizations is the number one consumer of children. is the CMO.

Starting point is 00:33:49 People are intellectually curious. And so they're like, wow, there's all these cool things I can do now with my hands. Either I had to rely on other teams or never got access to the way I wanted and blah, blah, blah, blah, and they just do it. This is actually true at Open Door. It's true in another great company than I'm on the board of. That's incredible. And so I think you can be intellectually curious and future proof yourself more than just, yes, you can work harder. and a big subscriber to like no days off and working all the time and all that stuff.

Starting point is 00:34:21 But fundamentally, the intellectual curiosity is able to learn new things. And that is how you embrace the future. So you said CMO is who's GMO. TMO. Both these two companies. So interesting. Both massive, you know, awesome companies with lots of engineers. And I think that's very encouraging. You know, for the executive particularly, I'm like, this definitely like the best

Starting point is 00:34:46 exactly different the company. And what are they building? Is it like landing pages and pay tests? Sometimes it's like more like we would have thought of analytics. Sometimes it's actually campaigns, like actual campaigns. It's just like they don't need to rely upon deputies and deputies and deputies to get actual work product. And so they're just like shipping things and like or shipping, you know, drafts of things

Starting point is 00:35:11 or giving the CEO insights into things themselves. I want to get your take on. the future of specifically the product triad. You work with a lot of product people, engineers, designers. Everyone's always wondering what the hell is going to happen in my career. Thoughts on just the future of those three specific roles. Well, I saw this podcast or listen to this podcast that Peter Fendon did, and he convinced me that the idea of a PM makes no sense, basically, in the future. If you think about decomposing the logic is what does the PM usually do. they take these inputs from customers,

Starting point is 00:35:46 they create this sequential roadmap that's well organized over the next year, blah, blah, blah, blah. That world is like ridiculous. Like right now, the capabilities of foundation models or companies like lovable and, you know, things like that are just so improving such a rapid rate that it makes no sense to have a year-long roadmap. And they're just like incoherent.

Starting point is 00:36:11 There are things that were impoverimbing. to do in November, that are actually pretty easy to do right now in March. And so I think you need to build an organization that's incredibly adapt at, you know, people say nimble and all that stuff, but incredibly adapted changing the roadmap almost on the fly. And I think intermediaries like conventional PMs don't make a lot of sense versus being prepared intellectually embracing and exploiting, noticing. So someone needs to notice that oh, wow, we can actually do this. But then exploiting it this week is the future of a very high growth,

Starting point is 00:36:52 stellar startup. We'll notice that something is now possible this week and create new features and new value for customers next week. That's such an interesting area of discussion. A lot of people listening to this RPM. So I want to try to defend that role just to see if I can convince you otherwise. And by the way, I will say Mark Andreessen had this really good visual of just what's happening here is like every, all those three functions, it's like the standoff where they're all like,

Starting point is 00:37:16 I'm going to take it. The future is my role. The future is design. That's engineering is the future. So the way I see it is as AI makes it easier to build and kind of eats the middle of the software development process. Just anyone can build. You tell the AI, here's what I want. The hard part, the gap at least for now is figuring out what to build and then aligning everyone around what to built. I agree with that. I actually think, like, whether you talk about someone who used to be a PM or someone used to be a designer or called an engineer, the skill is more like being a CEO now, which is, what are we building and why? Exactly. And to be a successful engineer, that trait's critical, to be a successful designer, because the tools and the ability to actually create the thing,

Starting point is 00:38:00 an object, is going to be easier and easier. But the art is knowing what to build. You know, another competitor of mine, Alfred Lynn at Sequoia likes to talk about being a chef. When you're a chef at like a prime restaurant, you're not actually cooking the dish. You're sampling, you know, your colleagues in editing their work a little bit. But fundamentally, it's half a commercial role. Being a chef in a famous restaurant is what's our value proposition? How do we differentiate ourselves? How do we brand ourselves?

Starting point is 00:38:32 What's our segment? What's our pricing, you know, et cetera? What's our location even? And that's what makes a famous chef. It's not, they're literally cooking the dish all the time. Okay. I 100% agree. Interestingly enough, PMs are called mini-COs often.

Starting point is 00:38:46 And I think the important thing is it's not like, what do you call this person? I think the question is, what skill will be most, like, where are human brain still going to be necessary? Business acumen. It's basically a business acumen. Right. Like, what will help this company grow and succeed? Exactly.

Starting point is 00:39:01 I understand the company's business equation, where we're trying to go and what the inputs and connection outputs are, and I can, on my own, create things that move the needle or potentially move the needle. It's very exciting because, you know, you can actually drive impact, like much more easily now as an individual. My conclusion based on what you just shared is, of the three roles, which role is best at that? And historically, it'd be PMs. Obviously, I think the important thing here is it's like the best, you know, it's like great PMs are great engineers, designers will do well. But I think, interestingly, what you're describing to me is what it sounds like what a great PM would be really good at, basically.

Starting point is 00:39:41 If they were exceptional, I think that's right. But I think a lot of the best engineers I've worked with have commercial instincts like Max Levton has this on steroids. Jeremy Stoppulman, he's worked with me very closely at PayPal before he started Yelp and got promoted to be engineering director and vice president of PayPal, has commercial instincts, you know, back when he was an individual contributor. So I think there are, are great engineers who are technically proficient that have always understood the business building. Yeah. I think that's like the ultimate unicorn is an engineer that is also very business-minded.

Starting point is 00:40:13 It's going to put a premium. I think at the age of AI will put an incredible premium on that because they're not going to need a large team. You're not going to be marshalling the forces. Like, you know, another example is a good friend of mine and is Director of Engineering at Rath. He ships as much code personally. So he has a team of about 20 people. He personally ships as much code as he used to as an individual contributor while he's managing a team of 20 because the tools are so great.

Starting point is 00:40:43 And he's become a leading pioneer in the usage of AI. And he's basically using AI as a second team. He's basically like, okay, you're the team manager. You do this. You do this. You do this. You do this. Stitch this together.

Starting point is 00:40:54 Check this out. And I think that is definitely in the future. I 100% agree. Engineers that are very good at that are just. extra valuable. What's your take on design in the future of design, the value of design? Well, you know, it's interesting. Design and a code are merging, and it's not clear to me who triumphs of like, is it code

Starting point is 00:41:16 becomes design or design just translate automatically into code. I'll make some investments that bet on both in some ways. But I think they're merging in a way where they're not separate, you know, a few I am so excited to tell you about this season's supporting sponsor Vanta. Vanta helps over 15,000 companies like Cursor, Ramp, Duolingo, Snowflake, and Atlassian, earn and prove trust with their customers. Teams are building and shipping products faster than ever thanks to AI. But as a result, the amount of risk being introduced into your product and your business is higher than it's ever been. Every security leader that I talk to is feeling the increasing weight of protecting their organization, their business, and not to mention their customer data.

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Starting point is 00:42:53 It just hasn't gone anywhere. It's a flat. we had the head of Claude design, Jenny Wend on the podcast, and she had this a kind of insight that the design process, there's no time for the design, the traditional design process. There's like engineers are shipping 17 things a day. There's no time to sit there and help mock and prototype and all these things. Well, let me give you a couple of concrete examples. So at Shopify, the way they developed, they've developed, they've been doing this for over

Starting point is 00:43:18 two years now. So this may seem normal, but they have not let PMs, uh, provide like PowerPoint or keynote presentations on product for like two years. Every presentation on product has to be a workable demo. And they just expect the PMs to create the products. And the execs just refuse to look at static, you know, we're going to have this feature. No, I want everything working. This is for two years.

Starting point is 00:43:46 So I think that, you know, again, like everything is just merging together. That's so interesting. You would think, though, because there are so many products, launching every single day. Like, there's just endless things to pay attention to. You think design would be a differentiator more and more. I do agree with that. I do agree with that, actually.

Starting point is 00:44:05 I think the alpha is in design, just like in marketing. It's not the tools. It's not the channels, not the metrics. It's in storytelling. It's how do you cut through the clutter in the snappiest, most compelling possible way? There's kind of an NP problem. There's so many different words you can use to express the same concept. But the person who can say, this is the way to,

Starting point is 00:44:25 frame it, you know, that proverbial thousand songs in your market is worth like all the tools in the world. Yeah. So that's the other part of my insight recently is just as AI makes it easier to build. It's kind of expanding from the middle out. And what remains is figuring out what to build and making it, iterating on the idea. And then it's at the other end of spectrum, which is distribution, getting anyone to pay any attention to what the heck you've done. Because again, there's so much happening every single day. Yeah, cutting through the clutter. I mean, that's always been critical. I mean, one of the time, when people are pitching me as an investor is one of the things I'm dialing into, you know, immediately is how the hell is this

Starting point is 00:44:59 going to cut through the clutter. It's one of the reasons why I don't like to take, like, customer feedback into account because by definition, when you put something in front of a customer, that's not a proxy for the real world. In the real world, you have to cut through the clutter while they're going to their Barry's boot camp, while they're doing their job, while they're raising their kids, you know, et cetera, et cetera. A lot of they're walking while they're on the subway. Like that, like, you know, an isolated fake experiment doesn't give you a, actionable insights and often is directly wrong. Interestingly, on that line, there's a few companies that are launching simile as one that is

Starting point is 00:45:31 simulating humans. I don't know if you heard about this company. They basically are building AI models of actual people so that you can simulate your marketing launch and your product experience with people before you launch. I don't know that I've seen that specific company. I have seen one or two sort of pitches. My general question as a refrain on those type of companies is what do they training on them. Because again, if they're not training on the right data, it's dangerous to say

Starting point is 00:46:00 you're simulating humans. Yeah. Yeah. That is the question. Oh, man. What a weird world. Along these lines actually have this, I don't know if you call it a hot take that AI content is going to surpass human content and that's just the future. Oh, that's inevitable. I was talking to someone and she was saying in like the Chinese TikTok app, it's just like all AI videos now and it's like very good. She like actually enjoys watching these videos and these stories. I think it'll be like a binary sort maybe. I could see products and content thriving that is clearly still human generated and that there's some desire for authenticity.

Starting point is 00:46:39 Just like, for example, you know, this piece of art is a Warhol. Anybody could create this now? High fidelity, but there's still an appreciation for this was created by Andy Warhol. I think there's going to be a curated experience. with a premium of provenance, you know, that you know is human created. And then there's just going to be a sort of a rank filtering of what's the best content. And whether it's AI generated or not, it's a little bit like the Ben Thompson's trajectory thing of curation, you know, versus algorithm.

Starting point is 00:47:10 There's going to be two poles and the curation maybe for human created stuff. And then there's going to be the algorithm, which is just what's the best? I 100% believe that. That makes so much sense. I was just thinking the other day, it's so interesting. that AI is getting very good at video. Like videos are actually fun to watch that are AI generated. And then like images are getting really good.

Starting point is 00:47:32 But writing is still really bad that is AI generated. And it's ironic that it's called a large language model. It's all context, text, text trained. And it's just like, that's the thing it's least good at, which is really weird. Well, I think part of it is the economic decision of token rationing by the LMs. Like they basically are, when you prompt, they're kind of trying to make their economics work within a bell curve distribution. And so, for example, I'd prompt an LLM to write something that's very short. The quality is significantly better than if it's a page, paragraph, I mean, page to chapter to book.

Starting point is 00:48:12 I think it's token ratioing versus actual quality. You would think, though, you know, like, I don't know if it was Hemingway of just like, if I had more time, I would have made it shorter. Like it takes more work. But then you have, I think the writing, right now what works best is short, many short examples.

Starting point is 00:48:32 And then humans picking, editing, reprompting. It's a little bit like when I used to be a litigator 25 years ago, the hardest part of writing a brief, or all the art and all the magic was the first paragraph. If I could write that first paragraph,

Starting point is 00:48:48 really well. The chance I would win the case and convince the judge would go through the roof. So what I would actually do is I might have three weeks to write a brief. I might spend the first week or more walking around the office

Starting point is 00:49:05 thinking through how am I going to nail the first three sentences. Once I figured out how I wanted to frame those first three sentences, I could write 30 pages in like two days. But getting that right could take a week or two. Sometimes it would occur to me in a shower or literally the, you know, shower or in the

Starting point is 00:49:24 middle of a run. It's like, oh, my God, here's how I distill it. Then I could just sit down and power through the rest of the brief. And I think it's a little bit like that. The power through the rest of the brief works, well, you still need the first three sentences. Is there a story from that time in your life that would be interesting to share? I didn't even know about that. So, yeah, not everybody knows, you know, I spent the first four and a half years of my professional career as a law clerk and then litigator, which occasionally comes in handy, truthfully, like sometimes trading off business risk against legal risk is a valuable thing to do. Sometimes it's not accidental that many of my best investments are in financial services

Starting point is 00:50:01 in heavily regulated areas because I think I can sort of do the legal risk assessment in my own brain. This is definitely true back in the day when I invested in YouTube. But I think most things that lawyers learn are very inconsistent with being entrepreneur. So when you're graded as a lawyer, you learn every exam in law school virtually is issue spotting. So you get credit for identifying. There's like a fact pattern. Identify all the issues and then resolve them. So you learn to identify everything that can go wrong.

Starting point is 00:50:35 Moderly useful, but very not useful as an entrepreneur. I mean, sure, you can identify all the reasons a company could fail. Not that difficult to do. The art is, you know, solving those. So, you know, not the best training. And then you also measure your productivity by hours worked. You know, literally you build per hour. It took me two years, maybe a year and a half after converting to technology to stop tracking all my time.

Starting point is 00:51:00 I just literally write down to my notebook, a half hour of this meeting, 20 minutes on this, you know, blah, blah, blah. It's couldn't get that out of my brain. That is so funny. And David Sachs was a lawyer, too. It's like interesting. That's true. Peter, Peter was a lawyer. Peter was smart enough to quit after five months and four days, I think.

Starting point is 00:51:18 never practiced or maybe even smarter than both of us. Okay. I'm going to hit on some hot takes, contrarian takes that you have. You have a number of these. I heard you share in a podcast recently. They asked you, why don't you have as many contrarian takes these days? And you're like, well, they're just all been proved right. And that's the problem is, you know, if you have good ideas, eventually you want them

Starting point is 00:51:38 to be adopted. It's a little bit like, you know, when you're an investor, you want to be contrarian. So Airbnb, you start with a contrarian take. But eventually, the company's going to succeed. It has to become consensus. Like, everybody in the world has to use it and believe in it and trust it. So you want that inflection. Like, you don't want to just have contrary it takes and then nobody believe it.

Starting point is 00:51:57 So you do need a refresh rate. And then the question is, how do you have, you know, how do you find new ideas? But you want to actually exhaust them. Okay. So one that I think people still would disagree with is that your advice is for, unless you're building an enterprise company, you don't actually want to be talking to customers. Yeah. I hate talking to customers.

Starting point is 00:52:18 I refuse to allow colleagues about and talk to customers. You know, there's the famous, you know, you can talk about the famous stuff and the Steve Jobs, you know, the horses and the older faster horses and all the stuff. But I think it's more important is it's often directly wrong. Customers don't know what they want and they're very bad because it's a subconscious decision, especially for consumers.

Starting point is 00:52:40 Like what I purchase, what I wear is not a conscious decision. And when you're consciously trying to answer, a subconscious decision, you actually give misleading information even when you're trying. You know, the proverbial example I like to use, but it's instructive is ask anybody who drives a super fancy car, like a Porsche or a Lamborghini,

Starting point is 00:53:00 like why they bought the car. 99% of the time, they will tell you every reason except the real reason. That once you realize that, you're like, I'm never asking customer getting anything. Now, if hardcore enterprise, customer development does work because there is a decision maker.

Starting point is 00:53:16 and the decision maker is mostly making utilitarian decision. And yes, there's political forces within the organization, and you may or may now be able to tap into those. But fundamentally, extracting that information is valuable. But a consumer, S&B, micro-merchant product, unmitigated disaster. And so the implication here is you need to rely on your instincts and gut and experience. Yeah, I mean, humans are humans.

Starting point is 00:53:42 I have this other line I like, which is everything important, you need to learn about humans was written by Shakespeare. Just read Shakespeare. That's better than all the customer research. Now, you are producing a movie, and ultimately this movie doesn't just need to be critically acclaimed. You have to sell tickets. So if you're not selling tickets, you have to question,

Starting point is 00:54:02 okay, is the trailer wrong? Is our distribution, you know, where we're trying to meet people to let them know about the movie? Is that wrong? Fortunately, unlike a movie, you can go back and say, have I casted this somewhat incorrectly, is the script slightly off, you know, et cetera. But the goal is selling tickets, and that's what you want to optimize for. But if you don't sell tickets successfully, economically, efficiently,

Starting point is 00:54:31 you definitely want to go back in a loop and try to reorient things so that you are selling tickets. So it's like KACLTV kind of stuff is what I'm hearing here. And so your insight here is just like, it's not only like, it's like, it's not going to help you. You're saying more so it's actually harmful. It's harmful. And then people will say, yeah, like I've signed in so many meetings and this would you agree with me, but where people will be like, I talked to eight customers, blah, blah, blah, blah. And I know that this isn't statistically represented.

Starting point is 00:55:01 But then they pontificate for an hour. And then they're like, oh, I know this is not, you know, blah, blah. And but once you hear this stuff, it's like we can't take this out of your brain. And then every other subsequent meeting is like this stuff that's just locked in the customer's brain. So yes, in the enterprise where you have like, I work with a company in AI that has 30 must-win accounts. That's like the goal for the company over the next two years, make sure all 30, and we're doing really well.

Starting point is 00:55:27 Get all 30 using our problem. Great. We actually can talk to all 30 customers. And we can actually meet the decision maker all 30 customers. And we can influence the CEO at all 30 customers. That is a useful exercise. If you're targeting a billion people on the planet, you are not getting a representative. Being a contrarian take, many people would not believe this as good advice.

Starting point is 00:55:52 Do you have a story, maybe an example of just like, wow, like someone talking to a customer's thing, we're going in the wrong direction for a while? Oh, all the time. They're called failed companies. You know, there's a reason why. I mean, there's a Darwinistic efficiency to this too, which is just like, hey, there are things you can, that. like, is it feasible to do X, Y, or Z? So for a lot of stuff, let's get a door dash. I don't, I don't think customers told us that we want a button on our phone to click

Starting point is 00:56:20 to deliver food. But you could talk to restaurants and say, hey, would you put this placard here so that people walking into a store know in the future they can get delivered? Okay, yeah, maybe. Then could you run an experiment of how many deliveries per hour would you have to do to, you know, break even? And is there enough density, you know, within this, like, there are ways to improve the odds that you can make the business work. But I don't think launching the company saying, hey, we found 10 people in Palo Alto, you know, do you want this button on your phone?

Starting point is 00:56:57 So, you know, when Tony and Evan walked into my office originally, the epiphany I had was, well, they had a stat, which is 93% of a restaurants the United States don't deliver. I was like, okay. seems like it should be a higher percentage than seven convinced and then when they were describing what they wanted to create Andrew Mason of Groupon fame had famously said these phones these devices should have two buttons on board and I'm hungry and I was like oh my god you're the alma hungry button and then so it just clicked on my brain and then it was like okay now we need to make it economically possible to scalably do this good luck guys and this advice is not just consumer. You're also talking like DoorDash has like SMB-ish. Yeah, like Square and things

Starting point is 00:57:44 like that. Square is a good example. Like anything sub mid-market, I think is it's directionally dangerous. And the advice here is basically trust your insights. Like you need to have the insight yourself. He can't find it. I think typically the best company is. Yeah. There's foundational insight. And, you know, people don't necessarily want to hear that. But like, there's logic. You can acid test, a pressure test, the logic. Like, to like, you know, to some extent, like when Brian first pitched me on Airbnb,

Starting point is 00:58:15 there was some interesting evidence he already had that this was going to be successful. The number one that one stuck with me at the time was he gave me the exact number of Craigslist listings that said, I want to rent

Starting point is 00:58:33 someone's bedroom. And it was actually a reasonable number. It was like 30 in the Bay Area. but given that you had to literally type it in and you know sort of have the epiphany yourself I was like that's a lot actually that's like probably a real market there and I was already like as soon as he said that

Starting point is 00:58:50 I was already leaning in and by the time he finished his three minute monologue though it was like this is the coolest thing ever I need to invest yeah and I think Airbnb was a good example where he was solving his own problem saw an opportunity wasn't like talking to people hey would you do this or anything and people would have said

Starting point is 00:59:05 you know if he'd sampled the wrong people definitely would have got feedback that was like, no, like very high risk. Like that's a good example where you had sample 10 random people, good chance at 9 plus percent would say, no, I don't do that. You know what's really interesting? I was just watching Taylor Swift's acceptance speech

Starting point is 00:59:23 at this award show, I Heart Media, something or other. And she gave this really powerful speech that when she was starting out, she was just kind of at home, working on songs, learning piano, just in a room on her own. and had thousands of hours to just iterate and learn and get better. Versus today, if you were to do this, you'd be posting it, sharing it, people are giving you feedback constantly.

Starting point is 00:59:46 And her advice is just, like, find ways to just not expose yourself to people for a long time. So I have a couple of friends who are, like, in artists in the music industry. And I think what she's saying is one of the reasons why it's sometimes difficult for artists who had success to recreate a success. because the first success was not data-driven, was not customer feedback-driven. It was like, I'm creating this, and it's resonating.

Starting point is 01:00:14 Then, because they have an audience, someone, either they or their manager or whoever, the label, blah, blah, blah, blah, wants them to get feedback. And it creates derivative, you know, sort of works, not strictly legally, but like derivative works, they're less inspired.

Starting point is 01:00:31 There's a podcast that Jack Aldman did with my friend Alex from the chain smoker, He actually talks about this at some length that they created this song that actually didn't resonate with a core, their normal audience, but actually resonated with a different audience, which is interesting. So I think you can get trapped with success. It's a good illustration, actually. There's also this concept of The Ugly Baby in Creativity, Inc. I don't know if you read that book at Catmull about every idea at Pixar. Like every great idea starts as this ugly baby.

Starting point is 01:01:07 Then no one wants to like help and pay attention to and just like, get this out of here. It's like you start. I mean, that is actually the startup. Like I use this prism as an investor, which is when I make a seed investment or a share's a investment, let's say I want half of my friends who are VCs to laugh at me. Like literally laugh because I know most of the people I compete with pretty well. And so I'm running this algorithm through my brain. Are these people going to laugh?

Starting point is 01:01:30 If so, like this is a great investment, potentially great investment because it's an ugly baby. And ugly babies were the ones where there's real alpha. That's so interesting you say that. I did some research recently on what are signs. We interviewed this me and Terrence Rohan. I don't know if you know, I'm VC. We interviewed early employee, people that have joined early generational companies many times.

Starting point is 01:01:51 And like the Open Open API, they joined Open AI early before anyone knew about it, Palantir really early, Stripe. And so we asked them, what did you look for? And there's three patterns. And one of them was exactly that.

Starting point is 01:02:00 The idea, people laughed at them. They thought it was crazy. There's never going to work, Palantir, for example, Open AI, for example. Yeah, my parents used to laugh at almost all my jobs attack. You know, it used to be very funny. They thought it was going to be homeless because most of them did not make sense to them. Classic parents, no idea what the hell of people doing tech. They did appreciate Stripe, though.

Starting point is 01:02:24 My mom always appreciated Stripe and, you know, always tried to lobby me to invest, and I finally listened. Nice. Good job, Mom. She earned her Keep. Okay, we just shifted perspective because Keith's iPad was dying. Classic, that's maybe the downside of the iPad. The downside of the iPad is I use it too much. It's like, that's product market fit.

Starting point is 01:02:46 Okay, I want to actually follow up on this discussion we're having about just finding great companies. A lot of people are starting AI companies now. There's so many launching. As an investor, I'm just curious, what's a sign that this is a worthwhile idea, considering the endless number of startups launching. And maybe what are some just like flags that are like, okay, maybe don't work on that idea? Well, the existential question that everybody talks about these days is, you know, are the foundation labs just going to be so proficient that there's no oxygen?

Starting point is 01:03:17 Because if you're building a successful startup, you need to build for like eight to 20 years into the future. Like whether you just discount a capital analysis or some other prism, it doesn't matter. Ultimately, you have to build for something that's durable for decades. And the rate of progress by the foundational labs, and not just one, multiple of them, really does start creating questions about the sustainability of even companies that look like they're thriving in the short term. So that's one question. The second question I'd ask is very typical.

Starting point is 01:03:50 I've always asked this question for like 25 years, which are, what are the accumulating advantages of this startup? You do want to believe that over time, you create. an unfair advantage and there are different species of accumulating advantages you know the one that people immediately gravitate to but it's only one illustration of a set of options is network effects but you want something that over time makes the business better and better and better arguably easier and easier at some point do you see those sorts of things at the beginning like when you're seeing in a you know stage startup yeah it's a great question because i think people can

Starting point is 01:04:24 conflate uh two things there's a difference between seeing it in understanding the potential So what I'm looking for when I need a founder is can they articulate where the accumulating advantages can be in theory, conceptually. They don't have to have demonstrated it. Yes, there's an occasional example once every five years you might find one where early you can actually point your finger on in empirically. But that's way too strict as a bar for an early stage investor. but I personally want the founder to articulate to me

Starting point is 01:04:59 where they can build accumulating advantages and maybe even sequentially identify when they would start either taking advantage of them, leveraging them, or measuring them. So when you're evaluating startups these days, I know this is like a very hard question to answer, but just what do you, is there anything in particular you're looking for

Starting point is 01:05:22 that you get really excited about? I'm a founder-driven industry. So the only thing I really care about is, does this founder have a non-zero chance of changing an industry of the world? And if they do, for a C or Series A investment, I'm in, period. Don't ask any of the other questions. That's all I need to identify. Not every investor who's been successful has the same algorithm they're running. There are technology-driven investors, like I would say Mark Andreessen is probably like something like that.

Starting point is 01:05:52 The node's a mix. He's both founder-driven and a technology-driven investor. There are investors who are sort of product slash market-driven investors. My colleague David Wyden, I'd say, is that. I think Alfred Lynn and Sequoia is mostly that. So you can have different sort of approaches, mental models, paradigms. But for me, is this founder extraordinary? Do I have reason to believe that this founder is the next Brian Chesky? You mentioned that you're an investor in all these, all these companies you listed are doing incredibly well. And you work with a lot of, you're on the boards of a lot of really successful,

Starting point is 01:06:26 incredibly good teams and companies. Is there just something they are doing the way they operate that is different from companies that are not as successful? I think the subtle signal, let's say very early, is speed. And, you know, it's one of those things that's easy to say, but let me try to be more concrete.

Starting point is 01:06:49 There's a tempo, an operating tempo that a successful company develops that develops very early in a company's trajectory and is incredibly impressive. I remember when Roloff Boto was on my board at Square, he led the series B, so he joined our board. And six months in, so two board meetings in, he said to me, he's like, I haven't seen this kind of tempo

Starting point is 01:07:14 since our PayPal days. And he'd been a VC at that point for nine years. And I was curious, I said, like, you know, what are you noticing? And he's like, at board meeting acts, you guys identify an opportunity or problem. And by the next board meeting, you've shipped solutions, addressed it, feature, just constantly consistently. And I think that's right. Like, so the time between the seed and series A affair was pretty tight. And I remember at the time, my chief of staff was Delian Esper.

Starting point is 01:07:50 off and Delian said to me after the second fair board meeting that he shadowed me at, he said, if there's one company in Silicon Valley that would cause me to leave being VC, it'd be fair. And I was like, interesting. Why? It's like the pace of execution. And his answer was exactly the same as wrong. He's like, there is something slightly off. And by the next morning meeting, not only have they identified the root causes, but they've

Starting point is 01:08:15 shipped and reacted and measured the impact. of the solution, and that compounds, that speed really does compound. So that's just one trait. But you see it. It did lead me to, for example, preempt the series A of ramp. So I led the seed in Mayish of 2019 and gave a term sheet to preempt the A in September, so pretty quick. One of the two signals was how fast ramp was able to be on the precipice of shipping the cards.

Starting point is 01:08:50 I've been working in financial services for a long time at that point, you know, 19 years or so. And there's just a lot of moving pieces to ship a car. You need these program managers. You need the sponsoring bank and you need this and this and this. It usually takes 9 to 12 months, best case 9. Ramp was on the precipice in like three months. And I was like, oh, my God. Like, I'm just never seen that velocity.

Starting point is 01:09:11 That was one of two, maybe three inputs. And I was like, yes, makes sense to double down already, even if we hadn't shipped anything yet. So I think that's one. Critical density of talent. You see companies just creating an unfair advantage. The team was excellent when you invested. It's now, wow, this team is getting better, you know, deeper, better, et cetera. So that's another signal.

Starting point is 01:09:34 The third thing that I've noticed, though, is I think they have a different hiring philosophy, ultimately. And maybe there's exceptions to this, but most of the companies I work with that are thriving. have basically skipped hiring senior people, senior experienced people. Mostly internally good talent. And I think that model has worked really well. It's definitely true of Ramp, definitely true of trade republic. It seems to be a mostly common ingredient, but there's probably exceptions. Wow.

Starting point is 01:10:12 That is an incredible answer instead of traits. Just to be clear what you're saying on that third piece, So it's not hire like fan CVPs from other successful companies and instead develop people internally as a trade of internally. Internally and almost turned it into a competitive advantage meaning a strategy. Like we're just not even going to interview people. We're not going to try. We're just going to promote from within. And I think in some roles, you know, it's not like you're higher at GC, you know, typically right out of law school.

Starting point is 01:10:41 But although we have done that once and it worked out pretty well, believe it or not. But I wouldn't recommend that. I have this blog post, Delian wrote this blog post of LessonC. Learned from Keith. And one talks about hiring senior people. And the rough prism is, are you hiring for value creation or value preservation? If you're hiring for value preservation, typically some experience is useful. On the value creation side, it's probably not. It's interesting how much of this comes back to just your initial point about hiring

Starting point is 01:11:11 and the team being everything. So number two is talent density. and three is helping people develop and be, you know, into the role versus finding someone. And then obviously speed all trickles down from just who you're hiring. Yeah, I mean, I've watched people use like even chief of staff roles to group talent. One company board meeting I was out this week that's just phenomenal on any metric. And the last two, his head, his CMO, who's who's fantastic, is performing miraculously, was his last chief of staff and his new head of product.

Starting point is 01:11:45 probably is his current chief of style and just like created this institution in factory where it can absorb ambitious talented people and over one two years in osmosis train them to be senior successful leaders when you talk about speed i think about ramp uh for sure uh when jeff was on the podcast their cpo he just like our title was velocity velocity velocity and i know they have like days. If you go to days.ramp.com, it's like the number of days since they launched. And they're just always looking at that number. How long is it? Oh, yeah. Every board meeting starts with that. The first slide, day, day 1184. And they're like, what are they worth like a hundred billion? Not quite, but they're probably not quite that much, but like a reasonable

Starting point is 01:12:33 fraction of that. Okay. That was incredibly valuable. Okay. One last hot take that I know you have that I want to make sure we share is this idea of criticizing in public versus. in private. Talk about that. Yeah. So this is a lesson I actually absorbed from one of the great founders I work with. And, you know, like many great founders, they have their own management philosophy. And one of the most important tenets is criticize people in public. And when you decompose the logic of it, it's so obviously true. But almost no one does this and very few people talk about it, even if they do it. So if you think about it, when you give people feedback negative individually, you're optimizing for the atomic unit, not the system. The reason why to do it in public

Starting point is 01:13:18 is it's more important for all the colleagues to understand that there's an issue. It's being addressed versus like they usually have suspicions, let's say, or concerns. And if you channeled the negative feedback to the individual, they don't know that you're addressing this, that you're on top of it. You're aware you're addressing it. Now it's a collaborative. And then also, let's, other people kind of raised their hand and say, you know what, I can kind of help with that or, you know, etc. And so it becomes like a team building exercise in some way versus like, oh, you have this deficiency. Go fix it yourself. And then the rest of the company, you know, is nervous about why this problem is persisting. When people hear this, they may, it may feel like, oh, wait, I'm just, it's like it feels aggressive to be criticized everyone in public comment.

Starting point is 01:14:09 Any advice for just like, how do you not make it this like, I don't know. scary environment or is that part of it? Well, I think you want to win. You know, and there's probably an in art to this. Like I would say, you know, some of the best coaches in sports probably do a bit of both. Like there's things they will say in front of the team. And then there's things that probably, you know,

Starting point is 01:14:28 channel to the individual player. So probably a mix, you know, could be very effective too. It feels like you're not a focus on psychological safety as a core tent. No, no, I don't believe in that at all. Like a high performance machine. don't have psychological safety, they're about winning. Like, for those who want to, you know, a good book that's off central casting for you is

Starting point is 01:14:50 read Jordan rules or watch the last dance if you like, but like fundamentally read Jordan rules. If you want to be Michael Jordan, you got to act like Michael Jordan. Do you feel like that's negatively correlated to this idea of psychological safety with success? For the most part. Yeah. Interesting. I'm going to take us to Failure Corner. Okay. So Failure Corner.

Starting point is 01:15:09 So that, you know, you talk about all these things you've done that are incredibly all these companies you invested in, all these businesses you build, PayPal, all these things. People don't realize there's also a lot of failures along the way. Is there a story of a time you failed in your career or investing that might illuminate the doubt? You know, when things don't go great. Well, I mentioned one. I alluded to one by action.

Starting point is 01:15:31 And I talked about being aqua hired or whatever into Google and being stuck there. So clearly not successful. That was a slide. So, you know, we did sell for like 187 million, but not. nowhere near the ambition, you know, didn't really achieve any of our goals, product-wise or company-wise. Investing teaches you, you know, mostly about failures. You know, if you're a world, world-class investor in the early stages, 30 to 40 percent hit rate is great and golden. By definition, that's like 50 to 60 percent, 70 percent failing. It's a little bit like those old Nike

Starting point is 01:16:07 commercials where there's the Michael Jordan one where it's like, you know, missed 100 to nine game winning shots in my career, or there's the tennis one. I think it's Federer that's like, you know, I something like I win 60% of my points. Actually, I'm like the best tennis player ever, but I lose 40%. So there's a lot of that in venture.

Starting point is 01:16:28 You definitely have failures all day long. I think one of the arts is like not getting too caught up in failure, actually. I think over on, I actually gave this feedback in the board meeting recently, which is someone, You know, well-mentioned, well-meaning, one or two board members are like, well, let's do retroses on our failures. And the company's doing really well. So I was like, you know what?

Starting point is 01:16:50 Honestly, I'm not sure I would do this. I was like, I don't want to deter people from taking ambitious shots on goal. And if you overemphasize failures and, you know, really people think they're going to get criticized. This is where the psychological safety maybe has some validity, which is be ambitious, be bold. Don't worry about the failing part unless there's things you missed. that could have been factored in, but you want people to take risk and you want people to be excited

Starting point is 01:17:17 about raising their hands for very difficult problems and challenges because that's how you create value. And so I was like, no, let's really not do these retros. Let's just focus on winning. Contrary intakes all around. Keith, is there anything else you wanted to share, anything else you want to leave listeners with

Starting point is 01:17:34 before we get to our very exciting lightning round? I'm excited for your lightning round. This is usually like one of the best parts of your podcast. Okay, first question. What are two or three books that you find yourself recommending most other people. So the number one one is called The Upsides Stress by Kelly McDougall's Professor at Stanford. And basically it argues in an incredibly compelling way that if you want to be happy, healthy,

Starting point is 01:17:53 healthy, you need more stress in your life, not less. So it's magic. The evidence she marshals is effectively uncritical at the outcome level, at the biochemical level. It is transformative to people to read this book. So I highly recommend it. Favorite recent movie or TV show you've enjoyed? TV actually just watched Nuremberg trial. Highly recommend Nuremberg.

Starting point is 01:18:19 There's a lot of lessons there that are applicable to the modern world. So I won't spoil it all. But even I'm kind of a student of history of politics. And watching the movie, I probably learned five or ten things that I never knew before. So highly, it's extreme. I mean, obviously, not an exciting, thrilling movie, but it's extremely well-produced movie

Starting point is 01:18:45 and incredibly useful to understand some of the travesties of history and how to prevent them in the future. Where do you find this? Is that one of the streaming services? It's either on Netflix or iTunes or both. Sweet. Okay.

Starting point is 01:19:01 Is there a product that you've recently discovered that you really love? Rarely, you know, I do find, I do find products that I'm addicted to. Like, you know, I don't have this per se about eight sleep, which is another one of my conventions is, you know, you must sleep eight hours a day. You must prioritize sleep, even when you're very busy. I am an investor in some somewhat biased in eight sleep, but it transforms people's lives. So I'm still addicted to that one.

Starting point is 01:19:28 I don't know if there's like a new product that, you know, I've been fanatically addicted to recently. Eight sleep counts. Do you have a life motto that you find yourself? coming back to in work or in life. No days off. Hashtag no days off. I don't believe in taking days off from workout. I don't believe taking days off from work, period.

Starting point is 01:19:48 Derivation for those are interested is when Bill Belichette won the Super Bowl for like whatever billionth time with the page minutes as back-to-back Super Bowl wins. I think he started the championship celebration parade with this chance of no days off. So that's kind of a mantra. And when you say no days off, are you saying like work every day? like, you know, like work the weekend sort of thing? Or what do you? That too.

Starting point is 01:20:12 But like, so let's say about the work outside. I believe I've missed seven days and seven years of working out. And it still kills me like half of those. I stole an annoyed that I missed. Like I still have really, really had reoriented my schedule. I should have been able to hit at least four of those. And I measure it. And I posted it at the end of every year.

Starting point is 01:20:30 Last year I missed none. So I was very happy. But I don't believe in excuses, basically. No days off is a proxy for I don't believe in excuses. And do you work out every day? Is that the rule? I mean, literally, there's only seven days in the last seven years after it worked out. That includes all kinds of illness, sickness, travel, international, time zone travel, weddings.

Starting point is 01:20:51 There's like, no excuses. Like, actually every day. All right. More than once, typically more than once a day. And you've told me before we started recording, you had a Barry's class this morning. You have another one later today. I do. And a lift.

Starting point is 01:21:04 Okay. Final question. So you were famously part of the PayPal Mafia. I'm curious if there was someone there that's like overperformed, someone that you worked with that you never thought would be that good. Honestly, no. A lot of investing in, you know, most of the derivative companies and stuff. And so I think I had a good spitey sense of which people, you know, had at least founder level ambition and could potentially build something. Sorry, I wish I could give you a better answer.

Starting point is 01:21:36 They would have been mad at you anyway, so this is the safe for answering. Well, it's Penn. If they've been super successful, they might not care. Peter T.O. Just kidding. Yeah, yeah, yeah. Thank you so much for doing this. I learned so much. This is going to help a lot of founders, a lot of people building stuff. Two final questions. We're going folks finding online if they want to reach out. And how can listeners be useful to you? Yeah. So, X.com. I tweet prolifically. You mentioned my pin tweet.

Starting point is 01:22:05 So that's probably the easiest way. Sweet. Key, thank you so much for being here. Pleasure to be with you. Thanks for the invitation. Thanks for accepting it. Bye, everyone. Thank you so much for listening.

Starting point is 01:22:17 If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review, as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at Lenny's Podcast.com. See you in the next episode.

Lenny's Podcast: Product | Career | Growth - Hard truths about building in the AI era | Keith Rabois (Khosla Ventures)

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